A Look At How Nestle Makes Billions Selling You Groundwater In A Bottle

A few weeks ago we shared with readers a lawsuit filed in Connecticut against Nestle Waters North America, Inc. alleging that the water they marketed as Poland 'Natural Spring Water' was actually just bottled groundwater...the same water that runs through the taps of many American households.

Now a new investigation from Bloomberg Businessweek reveals how large water bottling companies choose their plant locations based not on the steady supply of pristine, natural drinking water, as their labels and other marketing campaigns would lead you to believe, but based on which economically depressed municipalities offer up the most tax breaks and have the most lax water laws.

As an example, even in the drought stricken state of California, Bloomberg notes that Nestle was able to strike a sweetheart 20-year supply agreement with the U.S. Forest Service to pay roughly $0.000001 for the water in each bottle that consumers blindly drop a couple bucks to purchase.

But it illuminates how Nestlé has come to dominate a controversial industry, spring by spring, often going into economically depressed municipalities with the promise of jobs and new infrastructure in exchange for tax breaks and access to a resource that’s scarce for millions. Where Nestlé encounters grass-roots resistance against its industrial-strength guzzling, it deploys lawyers; where it’s welcome, it can push the limits of that hospitality, sometimes with the acquiescence of state and local governments that are too cash-strapped or inept to say no. There are the usual costs of doing business, including transportation, infrastructure, and salaries. But Nestlé pays little for the product it bottles—sometimes a municipal rate and other times just a nominal extraction fee. In Michigan, it’s $200.

Elsewhere, Nestlé has largely prevailed against opposition. In Fryeburg, Maine, it took the company four years to successfully appeal a zoning board resolution to build a facility it said it needed for its Poland Spring line. Last year it gained rights to extract water for the next 20 years—and perhaps 25 more after that. In San Bernardino, Calif., Nestlé has long paid the U.S. Forest Service an annual rate of $524 to extract about 30 million gallons, even during droughts. “Our public agencies have dropped the ball,” says Peter Gleick, co-founder of the Pacific Institute, which focuses on water issues. “Every gallon of water that is taken out of a natural system for bottled water is a gallon of water that doesn’t flow down a stream, that doesn’t support a natural ecosystem,” he says.

Not surprisingly, Nestlé isn’t the only bottled water company playing these games. As Bloomberg notes, Pepsi and Coca-Cola bottle municipal water from Detroit for their Aquafina and Dasani brands, respectively; they pay city rates, then sell the product back for a massive profit.

Of course, even if it is pulled from a 'natural spring', which often times it is not, bottled water isn’t necessarily more safe than tap water despite the fact that you're paying a 1,000,000x markup for the product. In the U.S., municipalities with 2.5 million or more people are required to test their supply dozens of times each day, whereas those with fewer than 50,000 customers must test for certain contaminants 60 times per month.

Bottled water companies, on the other hand, aren’t required to monitor their reserve or report contamination, even though most will say that they do...you just have to take their word for it. That said, as we pointed out in the post below, American's are increasingly no longer willing to do that...

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A group of bottled water drinkers has brought a class action lawsuit against Nestle, the company which owns Poland Spring, alleging that the Maine business has long deceived consumers by mislabeling common groundwater. The lawsuit was filed on Tuesday in a Connecticut federal court and accuses Nestle Waters North America Inc. of a “colossal fraud perpetrated against American consumers” the Bangor Daily News reports.

The plaintiffs claim that falsely labeling its "groundwater" product as pure spring water allowed Nestle to sell Poland Spring water at a premium; as a result the consumers who brought the legal action are seeking at least $5 million in monetary damages for a national class and several state subclasses. They requested a jury trial. The civil suit was brought by 11 people from the Northeast who collectively spent thousands of dollars on Poland Spring brand water in recent years. It seeks millions of dollars in damages for a nationwide class and hinges on whether the sources of Poland Spring water meet the Food and Drug Administration’s definition of a spring.

The 325-page lawsuit, which was filed by lawyers from four firms, claims that none of the company’s Maine water sources meets the federal definition for spring water and that the company has “politically compromised” state regulators. Rather than spring water, Nestle Waters is actually purifying and bottling groundwater, some of which comes from sites near waste and garbage dumps, the suit claims. The legal challenge comes as Nestle is looking to expand its operations in Maine.

For instance, the suit claims that the company’s wells in Poland, Maine, have never been scientifically proven to be connected to a spring and draw in surface water, which cannot legally be called spring water. It further alleges that the company has put water from some of these wells through a purification process that disqualifies it as spring water under federal regulations.

Poland Spring has gotten away with this deception for years, the suit claims, by co-opting state regulators and interweaving its interests with those of state government. Since 1998 the company has generated millions of dollars for Maine through licensing agreements, and since 2003 it has had an executive on the governor-appointed body that oversees the state drinking-water regulation enforcement agency, the suit states.

The court complaint further says that the Maine Drinking Water Program scientist who approved many of the company’s spring water permits spent a decade working with this executive at a private engineering firm and that the agency failed to get independent proof of the springs’ existence.

In response to the lawsuit, a Nestle Waters spokesperson said that its water meets all relevant federal and state regulations on the classification and collection of spring water and that the suit is “an obvious attempt to manipulate the legal system for personal gain.”

“The claims made in the lawsuit are without merit. Poland Spring is 100 [percent] spring water.”

This is not the first time that Nestle Waters has faced such allegations. In 2003, it settled a class action lawsuit alleging that Poland Spring water doesn’t come from a spring. In that case, the company did not admit the allegation but agreed to pay about $10 million in discounts to consumers and charity contributions. In other words, pulling a page from Wall Street, it neither admitted, nor denied guilt.